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investment hold

Model students do all their homework and get top grades. A role model is someone to look up to. Model prisoners earn time off for good behavior.

Model portfolios are a whole different thing.

Model portfolios are the predominant method of managing wealth these days. There is an understandable reason: they can be profitable for the financial firm. Simple to operate, standardized, easy to talk about–and the pie charts look great on paper.

Out in the real world, models have a glaring flaw. Typically, every client in the model owns the same thing—no differences. But there are valid reasons why people with the same investment objective might have portfolios that vary one from another.

For example, our midwestern clients often want to follow the “Oracle of Omaha.” People everywhere would like to own a piece of the hometown company that does well.

A larger source of variation arises from investment ‘holds.’ Think of shares in a leading, well-run company that was trading at an attractive low price years ago. Once purchased, it may make sense to be a percentage owner for the long haul. But after it goes up in value, it is not the bargain it once was, and new clients find better bargains elsewhere.

Or clients may come to us with long-held stocks purchased at low cost many years before. Income taxes would be a problem if they were all sold at once.

These factors and more create valid, useful variations in client portfolios. When we began to build our systems and processes to tailor portfolios to each client, we quickly realized that model portfolios would only be good for us, not you (our opinion). That isn’t how we conduct business.

At 228 Main our research drives the development of rules-based trading protocols that we can effectively apply across client portfolios. Our systems accommodate the concept of the investment ‘hold,’ and your specific instructions about specific holdings. Our rules-based trading helps us aim for the efficiency of models without the drawback of mass standardization, regardless of your circumstances.

Two things help us immensely. You and we seem to be on the same page with how we think about investing—we are a tight group. And the mutual trust is key: you trust us to make the most of whatever is going on; we trust you to persevere.

Clients, if you would like to discuss this or any other pertinent topic in more detail, please email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

Stock investing involves risk including loss of principal.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.